2013 (1) TMI 67

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..... . The brief facts giving rise to the appeal may be noted. We are concerned with the assessment year 2007-08. The appellant-assessee is a private limited company engaged in the manufacture and sale of motorcycles. In the return of income, an amount of Rs. 1,58,70,623/- was claimed as deduction on account of inventory written off. In the course of the assessment proceedings under Section 143(3) of the Act, the assessee was asked to justify the claim which it did by pointing out that the claim consisted of Rs. 1,23,36,086/- being the amount of raw material component and consumables written off and Rs. 35,34,537/- being the amount of finished goods written off. The assessee claimed that it was consistently following the principle of "cost or ne .....

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..... unt had already been taxed in the assessment year 2006-07, the same could not be brought to tax in the year under appeal and therefore, the loss of Rs. 116,48,29,528 had to be increased by the said amount of Rs. 8,68,81,641.     FINDING     The Assessing Officer is hereby directed to verify the facts and then allow the loss." 5. The revenue carried the matter in appeal before the Tribunal and questioned the decision of the CIT(Appeals) to delete the addition. Its case was that the claim represented a contingent liability and was not allowable as deduction. The Tribunal, after adverting to the rival contentions in detail accepted the contention of the revenue and held that the valuation of the closing stock, .....

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..... according to the counsel for the assessee, from the accounts themselves and therefore deserve a look. There is no dispute that the principle "cost or net realizable value, whichever is lower" is an accepted method of valuation of inventory. There is also no dispute that AS-2 issued by the Institute of Chartered Accountants of India are binding on both the assessee as well as the tax authorities under Section 145 of the Act. The only objection of the revenue, accepted by the Tribunal, is that the write off factor of 8.5% has not been proved by the assessee. The figures which are set out by the assessee in Annexure G show how the assessee arrived at the write off factor. These figures have to be verified by the Assessing officer. While theref .....

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